When a person has decided that bankruptcy is the only way to fix their debt problems, the only concern next is if you file a Chapter 7 or Chapter 13 bankruptcy. It is commonly up to the individuals needs as to which form of bankruptcy you file. There are several reasons that a person would opt for Chapter 7 bankruptcy over a Chapter 13.
It is important to know that for some people will not qualify for on form of bankruptcy or the other. However, for the most part people will be able to choose which form of bankruptcy is best for your personal needs. Which is preferred to many? A Chapter 7 is more preferable than a Chapter 13. Some undesirable side effects happen when a person files for a Chapter 13.
Legal Fees and Paperwork
Lawyers are a needed person with either the Chapter 7 or a Chapter 13 bankruptcy. However, when you opt for a Chapter 7 bankruptcy the legal fees are much less. The process can last for 4-6 months significantly less time and cheaper than a Chapter 13. This is because the process is shorter therefore the legal fees are reduced as well.
Another difference between the two ways to file bankruptcy is the paperwork that is needed. When you opt for a Chapter 7 bankruptcy, you will not be required to make monthly payments and added paperwork. In a Chapter 7 bankruptcy most of your debts are discharged require no extra payments. Since your future income is not part of this bankruptcy, you are not required to file any monthly paperwork.
Income and Assets Stay Yours
One thing that causes many people to opt for a Chapter 7 bankruptcy is that when everything is over it all is still yours. The income that you receive after filing the Chapter 7 bankruptcy is going to stay yours. With a Chapter 13 bankruptcy, you are required to notify any income changes and make payments each month. The only way that income would have to be notified with a Chapter 7 bankruptcy is if it is an inheritance that you received within 6 months after your petition is filed.
Many individuals are unhappy with the liquidation process that you can happen during a Chapter 7 bankruptcy. If you look at facts, you will see that with the loopholes and with the exceptions that you can file most people do not lose all their assets. A Chapter 13 bankruptcy does not give debtors the options to retain assets; however, the list of exemptions in the Chapter 7 process can be extensive.
It is important to know the difference between types of debts. There are two types of debt secured and unsecured. Secured debts are those that have collateral behind them, for example a mortgage and a car loan. Unsecured debts are debts that are those debts that are not backed by a primary asset, for example, credit or consumer cards, personal loans, and medical bills. There is a secondary category within the unsecured debts, these are student loans, child support and taxes.
When you file for a Chapter 7 all your unsecured debt, except those in the secondary category, are completely discharged. This is not the case with a Chapter 13 bankruptcy; you are still responsible for all of your debts. A Chapter 13 bankruptcy consolidates your debts it does not erase them.
Per federal law, a Chapter 7 bankruptcy will take between 4 to 6 months to complete the process. This can sometimes be seen as a long time; however, it is actually a very short period of time. The average Chapter 13 bankruptcy can take between 3 to 5 years. As you can see if you opt for a Chapter 7 bankruptcy, you will see it is only a fraction of the time it takes to complete a Chapter 13.
No matter what bankruptcy you choose your credit will be impacted in some negative way. When individuals opted for a Chapter 7 bankruptcy, they saw that their credit scores were increasing after the first 12 months post-bankruptcy. It is also important for a person to maintain a good healthy payment history. Once you have filed you will need to try to continue to increase your positive credit history. At this point, you will be able to qualify for an FHA home loan, and begin to start your life over.
It can be very important to know which type of bankruptcy is the best for your situation. It may be a Chapter 13 bankruptcy however; there are many benefits that can come if you opt for a Chapter 7 bankruptcy. Taking into consideration all the pros and cons of each bankruptcy can help you determine which is the best option for you.